South Africa, Capital Markets in Africa: Fitch Ratings downgraded South Africa’s local-currency debt one level to move it into line with the foreign-currency rating, bringing the nation’s 1.7 trillion rand ($118 billion) of domestic debt a step closer to junk level.

The one-step cut to BBB-, the lowest investment grade, was part of a review of Fitch’s local-currency assessments, applying new criteria that resulted in downgrades for 23 issuers, the company said in a report that was first published on July 22. The outlook for South Africa’s rating was kept at stable.

“Although the action represents an alignment, it also serves as a timely reminder of the risks of a downgrade that lie ahead and the urgency of actions required to reinvigorate the economy,” South Africa’s National Treasury said in an e-mailed statement.

South Africa’s government debt levels are rising as the plunge in commodity prices and slow global demand curbs tax revenue. Finance Minister Pravin Gordhan pledged in his February budget to narrow the fiscal deficit and limit gross debt to 50.5 percent of GDP by 2019 by curbing spending and raising taxes. About 90 percent of the government’s debt is rand-denominated, according to data compiled by Bloomberg.

Fitch kept its evaluation of South Africa’s foreign-currency debt at BBB-, one step above sub-investment grade, in June after cutting it a level in December. Moody’s Investors Service left South Africa’s credit rating at two levels above non-investment grade in May, while S&P Global Ratings kept its assessment at BBB-, one level above junk, last month.

“Whilst a change on technical criteria to the local ratings for South Africa, this does bring the narrative around local ratings entering sub-investment grade onto the table once again,” Peter Attard Montalto, an economist at Nomura International Plc in London, said in an e-mailed response to questions. “It means a widely expected downgrade of the foreign rating would also bring the local rating into junk.”

The rand weakened 0.2 percent to 14.3870 per dollar by 10:25 a.m. in Johannesburg in a third day of declines. Yields on South African rand-denominated debt due December 2026 fell two basis points to 8.76 percent.